DineEquity, Inc. Reports Third Quarter Results

Completes Applebee’s Refranchising Initiative

Significantly Reduces Total Debt by $167 Million

GLENDALE, CA- (iFranchiseNews.com) – Oct. 30, 2012 – DineEquity, Inc. (NYSE: DIN), the parent company of Applebee’s Neighborhood Grill & Bar and IHOP Restaurants, today announced financial results for the third quarter of 2012.

“We are pleased with our results for the third quarter, which was highlighted by the great progress we made against our long-term strategic goals. Earlier this month, we achieved a significant milestone with the completion of our transition to a fully-franchised restaurant system. Our more efficient business model continued to generate strong free cash flow, enabling further debt reduction as we optimize our G&A structure to create additional value for our stockholders,” saidJulia A. Stewart, Chairman and Chief Executive Officer of DineEquity, Inc. “Our strategy at Applebee’s yielded solid performance in the third quarter, where our revitalization initiatives continue to fuel momentum. We continued the hard work already underway at IHOP to restore same-restaurant sales growth. Most importantly, we have strong alignment with our IHOP franchisees to execute on our plan for improvement.”

Third Quarter 2012 Financial Highlights

  • Total debt was reduced by $167.2 million in the third quarter of 2012 as a result of net cash proceeds and financing obligation reductions from the refranchise and sale of Applebee’s company-operated restaurants and free cash flow. The Company reduced Term Loan balances by $106.1 million and financing and capital lease obligations by $61.1 million.
  • Adjusted net income available to common stockholders was $18.9 million, representing adjusted earnings per diluted share of $1.03 for the third quarter of 2012. This compares to $19.1 million, or adjusted earnings per diluted share of $1.04, for the same quarter in 2011. The decrease in adjusted earnings was due to, as expected, lower segment profit caused by the execution of our strategy to refranchise Applebee’s company-operated restaurants. This item was partially offset by lower cash interest expense. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $58.7 million, or earnings per diluted share of $3.14 for the third quarter of 2012, compared to $15.5 million, or earnings per diluted share of $0.85, for the same quarter in 2011. The increase was primarily due to a higher gain on the refranchise and sale of Applebee’s company-operated restaurants and lower interest expense. These items were partially offset by higher income taxes, an increase in general and administrative expenses, and, as expected, lower segment profit due to the refranchise and sale of Applebee’s company-operated restaurants.
  • Consolidated general and administrative expenses were $48.7 million for the third quarter of 2012 compared to $38.7 million in the third quarter of 2011. The increase was primarily due to a $9 million non-recurring litigation settlement and net severance charges associated with the Company’s previously announced restructuring initiative to lower general and administrative expenses by approximately $10 million to $12 million on an annualized basis. These items were partially offset by the savings in employee compensation associated with the workforce reduction.
  • Applebee’s company-operated restaurant operating margin was 15.5% for the third quarter of 2012 compared to 14.2% for the same quarter in 2011, an increase of 130 basis points. The increase was primarily due to cessation of depreciation on restaurants held for sale, the refranchising of lower margin company-operated restaurants, and lower advertising expense. These items were partially offset by higher labor expense and commodity inflation.

First Nine Months of 2012 Highlights

  • Total debt was reduced by $255.5 million in the first nine months of 2012 as a result of net cash proceeds and financing obligation reductions from the refranchise and sale of Applebee’s company-operated restaurants and free cash flow. The Company reduced Term Loan balances by $175.2 million, Senior Notes by $3.6 million, and financing and capital lease obligations by $76.7 million.
  • Adjusted net income available to common stockholders was $62.6 million in the first nine months of 2012, representing adjusted earnings per diluted share of $3.44. This compares to $61.7 million, or adjusted earnings per diluted share of $3.37, for the same period in 2011. The increase in adjusted earnings was due to lower cash interest expense, partially offset by, as expected, lower segment profit due to the refranchise and sale of Applebee’s company-operated restaurants and lower income taxes. (See “Non-GAAP Financial Measures” below.)
  • GAAP net income available to common stockholders was $104.3 million in the first nine months of 2012, or earnings per diluted share of $5.66, compared to $43.4 million, or earnings per diluted share of $2.38 for the same period in 2011. The increase was primarily due to a higher gain on the refranchise and sale of Applebee’s company-operated restaurants, lower impairment and closure charges, and lower interest expense. These items were partially offset by higher income tax expense, an increase in general and administrative expenses, and, as expected, lower segment profit due to refranchising.
  • EBITDA was $226.3 million for the first nine months of 2012. (See “Non-GAAP Financial Measures” below.)
  • For the first nine months of 2012, cash flows from operating activities were $68.1 million, capital expenditures were $13.5 million, and free cash flow was $64.9 million. (See “Non-GAAP Financial Measures” below.)
  • Applebee’s company-operated restaurant operating margin was 16.8% for the first nine months of 2012 compared to 14.4% for the same period in 2011. The increase of 240 basis points was primarily due to lower depreciation expense, improved control of waste, and the refranchising of lower margin company-operated restaurants. These items were partially offset by commodity inflation, new menu related expense, and higher labor expense.

Refranchise and Sale of Applebee’s Company-Operated Restaurants

During the third quarter of 2012, DineEquity completed the sale of 33 and 65 Applebee’s company-operated restaurants to American Franchise Capital, LLC and TSFR Apple Venture, respectively. After-tax net proceeds of approximately $87 million were used to retire debt.

On October 3, 2012, DineEquity completed the sale of 39 Applebee’s company-operated restaurants located in Virginia to Potomac Family Dining Group, LLC. After-tax net proceeds of approximately $24 million were used to further reduce debt.

DineEquity has now completed its Applebee’s refranchising program and transitioned to a 99% franchised restaurant system and is now considered to be fully franchised. As a result, DineEquity’s business model is less capital intensive with higher operating margins and the Company expects to have cash flow with substantially reduced volatility over time. The Company currently retains 23 Applebee’s company-operated restaurants in the Kansas City area for test market purposes.

Same-Restaurant Sales Performance

Third Quarter 2012

  • Applebee’s domestic system-wide same-restaurant sales increased 2.0% for the third quarter of 2012 compared to the third quarter of 2011. The increase in same-restaurant sales reflected a higher average guest check, partially offset by a decline in traffic compared to the third quarter of 2011.
  • IHOP’s domestic system-wide same restaurant sales decreased 2.0% for the third quarter of 2012 compared to the third quarter of 2011. The decline in same-restaurant sales reflected a decline in traffic, partially offset by a slightly higher average guest check compared to the third quarter of 2011.

First Nine Months of 2012

  • Applebee’s domestic system-wide same-restaurant sales increased 1.3% in the first nine months of 2012 compared to the same period in 2011. The increase in same-restaurant sales was mainly driven by a higher average guest check, partially offset by a decline in traffic compared to the first nine months of 2011.
  • IHOP’s domestic system-wide same-restaurant sales declined 1.3% in the first nine months of 2012 compared to the same period in 2011. The decline in same-restaurant sales reflected a decline in traffic, partially offset by a higher average guest check compared to the first nine months of 2011.

Investor Conference Call Today

The Company will host an investor conference call today (Tuesday, October 30, 2012, at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time) to discuss its third quarter results. To participate on the call, please dial (888) 679-8038 and reference pass code 80617185. International callers, please dial (617) 213-4850 and reference pass code 80617185. Participants may also pre-register to obtain a unique pin number to join the live call without operator assistance by visiting the following Web site:

https://www.theconferencingservice.com/prereg/key.process?key=PXPLWDFMU

A live webcast of the call will be available on DineEquity’s Web site at www.dineequity.com, and may be accessed by visiting Calls & Presentations under the site’s Investor Information section. Participants should allow approximately ten minutes prior to the call’s start time to visit the site and download any streaming media software needed to listen to the webcast. A telephonic replay of the call may be accessed through 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) onNovember 6, 2012 by dialing (888) 286-8010 and referencing pass code 77612832. International callers, please dial (617) 801-6888 and reference pass code 77612832. An online archive of the webcast also will be available on the Investor Information section of DineEquity’s Web site.

About DineEquity, Inc.

Based in Glendale, California, DineEquity, Inc., through its subsidiaries, franchises and operates under the Applebee’s Neighborhood Grill & Bar and IHOP brands. With more than 3,500 restaurants combined in 18 countries, over 400 franchisees and approximately 200,000 team members (including franchisee- and company-operated restaurant employees), DineEquity is one of the largest full-service restaurant companies in the world. For more information onDineEquity, visit the Company’s Web site located at www.dineequity.com.

Forward-Looking Statements

Statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. These factors include, but are not limited to: the effect of general economic conditions; the Company’s substantial indebtedness; risk of future impairment charges; the Company’s results in any given period differing from guidance provided to the public; the highly competitive nature of the restaurant business; the Company’s business strategy failing to achieve anticipated results; risks associated with the restaurant industry; shortages or interruptions in the supply or delivery of food; changing health or dietary preferences; our dependence upon our franchisees; our engagement in business in foreign markets; harm to our brands’ reputation; litigation; environmental liability; liability relating to employees; failure to comply with applicable laws and regulations; failure to effectively implement restaurant development plans; concentration of Applebee’s franchised restaurants in a limited number of franchisees; credit risk from IHOP franchisees operating under our previous business model; termination or non-renewal of franchise agreements; franchisees breaching their franchise agreements; insolvency proceedings involving franchisees; changes in the number and quality of franchisees; inability of franchisees to fund capital expenditures; third-party claims with respect to intellectual property assets; heavy dependence on information technology; failure to protect the integrity and security of individually identifiable information; failure to execute on a business continuity plan; inability to attract and retain talented employees; risks associated with retail brand initiatives; failure of our internal controls; and other factors discussed from time to time in the Company’s Annual and Quarterly Reports on Forms 10-K and 10-Q and in the Company’s other filings with the Securities and Exchange Commission. The forward-looking statements contained in this release are made as of the date hereof and the Company assumes no obligation to update or supplement any forward-looking statements.

Non-GAAP Financial Measures

This news release includes references to the Company’s non-GAAP financial measures “adjusted net income available to common stockholders (adjusted EPS),” “EBITDA,” “free cash flow,” and “segment EBITDA.” “Adjusted EPS” is computed for a given period by deducting from net income (loss) available to common stockholders for such period the effect of any impairment and closure charges, any gain or loss related to debt extinguishment, any intangible asset amortization, any non-cash interest expense, any debt modification costs, any one-time litigation settlement charges, any general and administrative restructuring costs, net of savings, any gain or loss related to the disposition of assets, and any state income tax impact of deferred taxes due to refranchising incurred in such period. This is presented on an aggregate basis and a per share (diluted) basis. The Company defines “EBITDA” for a given period is defined as income before income taxes less interest expense, loss on retirement of debt, depreciation and amortization, impairment and closure charges, non-cash stock-based compensation, gain/loss on disposition of assets and other charge backs as defined by its credit agreement. “Free cash flow” for a given period is defined as cash provided by operating activities, plus receipts from notes and equipment contracts receivable (“long-term notes receivable”), less dividends paid and capital expenditures. “Segment EBITDA” for a given period is defined as gross segment profit plus depreciation and amortization as well as interest charges related to the segment. Management utilizes EBITDA for debt covenant purposes and free cash flow to determine the amount of cash remaining for general corporate and strategic purposes after the receipts from long-term notes receivable, and the funding of operating activities, capital expenditures and preferred dividends. Management believes this information is helpful to investors to determine the Company’s adherence to debt covenants and the Company’s cash available for these purposes. Adjusted EPS, EBITDA, free cash flow and segment EBITDA are supplemental non-GAAP financial measures and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with United States generally accepted accounting principles.

DineEquity, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Segment Revenues:
Franchise revenues $ 102,674 $ 97,679 $ 313,542 $ 300,782
Company restaurant sales      79,572  131,618    274,259    420,955
Rental revenues      30,920    31,163      92,096      95,003
Financing revenues        3,152      4,021      11,394      16,279
Total segment revenues    216,318  264,481    691,291    833,019
Segment Expenses:
Franchise expenses      27,148    25,006      81,126      78,656
Company restaurant expenses      68,541  113,976    232,298    363,021
Rental expenses      24,237    24,521      73,075      73,734
Financing expenses             15         425        1,586        6,001
Total segment expenses    119,941  163,928    388,085    521,412
Gross segment profit      96,377  100,553    303,206    311,607
General and administrative expenses      48,737    38,733    125,608    115,152
Interest expense      28,896    32,170      88,767    101,343
Impairment and closure charges           420         193        1,264      26,947
Amortization of intangible assets        3,072      3,075        9,222        9,225
Loss (gain) on disposition of assets    (73,650 )      1,176    (89,642 )    (21,287 )
Loss on extinguishment of debt        2,306      —        4,917        7,885
Debt modification costs      —         (21 )      —        4,103
Income before income taxes      86,596    25,227    163,070      68,239
Provision for income taxes    (26,023 )    (8,702 )    (54,215 )    (21,667 )
Net income $   60,573 $ 16,525 $ 108,855 $   46,572
Net income available to common stockholders:
Net income $   60,573 $ 16,525 $ 108,855 $   46,572
Less: Accretion of Series B Convertible Preferred Stock         (688 )       (647 )      (2,033 )      (1,915 )
Less: Net income allocated to unvested participating restricted stock      (1,187 )       (359 )      (2,477 )      (1,212 )
Net income available to common stockholders $   58,698 $ 15,519 $ 104,345 $   43,445
Net income available to common stockholders per share:
Basic $       3.26 $     0.86 $       5.84 $       2.43
Diluted $       3.14 $     0.85 $       5.66 $       2.38
Weighted average shares outstanding:
Basic      18,006    17,968      17,859      17,912
Diluted      18,924    18,243      18,801      18,268
DineEquity, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
September 30, December 31,
2012 2011
Assets (Unaudited)
Current assets:
Cash and cash equivalents $      71,838 $      60,691
Receivables, net         75,532       115,667
Prepaid income taxes              312         13,922
Prepaid gift cards         39,879         45,412
Deferred income taxes         23,659         20,579
Assets held for sale         16,372           9,363
Other current assets         15,311         11,313
Total current assets       242,903       276,947
Long-term receivables       214,772       226,526
Property and equipment, net       345,603       474,154
Goodwill       697,470       697,470
Other intangible assets, net       809,217       822,361
Other assets, net       111,792       116,836
Total assets $ 2,421,757 $ 2,614,294
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term debt $        7,420 $        7,420
Accounts payable         31,959         29,013
Accrued employee compensation and benefits         19,701         26,191
Gift card liability         84,115       146,955
Accrued interest payable         31,452         12,537
Current maturities of capital lease and financing obligations         12,848         13,480
Other accrued expenses         25,398         22,048
Total current liabilities       212,893       257,644
Long-term debt, less current maturities    1,232,707    1,411,448
Financing obligations, less current maturities         93,774       162,658
Capital lease obligations, less current maturities       127,198       134,407
Deferred income taxes       366,529       383,810
Other liabilities       105,551       109,107
Total liabilities    2,138,652    2,459,074
Commitments and contingencies
Stockholders’ equity:
Series B Convertible Preferred Stock, at accreted value, shares:10,000,000 authorized; 35,000 issued; September 30, 2012 and December 31, 2011 – 34,900 outstanding         46,541         44,508
Common stock, $0.01 par value, shares: 40,000,000 authorized; September 30, 2012 – 24,694,241 issued, 18,418,903 outstanding; December 31, 2011 – 24,658,985 issued,18,060,206 outstanding              247              247
Additional paid-in-capital       214,440       205,663
Retained earnings       303,691       196,869
Accumulated other comprehensive loss            (150 )            (294 )
Treasury stock, at cost; shares: September 30, 2012 – 6,275,338; December 31, 2011 – 6,598,779     (281,664 )     (291,773 )
Total stockholders’ equity       283,105      155,220
Total liabilities and stockholders’ equity $ 2,421,757 $ 2,614,294
DineEquity, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Nine Months Ended
September 30,
2012 2011
Cash flows from operating activities: (Unaudited)
Net income $ 108,855 $   46,572
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization      30,756      38,599
Non-cash interest expense        4,547        4,582
Loss on extinguishment of debt        4,917        7,885
Impairment and closure charges           991      26,729
Deferred income taxes    (20,361 )        1,866
Non-cash stock-based compensation expense        8,799        6,913
Tax benefit from stock-based compensation        6,334        6,085
Excess tax benefit from stock options exercised      (4,757 )       (5,713 )
Gain on disposition of assets    (89,642 )     (21,287 )
Other      (1,768 )          (217 )
Changes in operating assets and liabilities:
Receivables      41,422      25,360
Prepaid expenses        7,414        1,247
Current income tax receivables and payables      12,512      21,519
Accounts payable        2,080       (3,992 )
Accrued employee compensation and benefits      (6,490 )       (9,099 )
Gift card liability    (62,841 )     (56,906 )
Other accrued expenses      25,298         4,928
Cash flows provided by operating activities     68,066      95,071
Cash flows from investing activities:
Additions to property and equipment    (13,477 )     (20,829 )
Proceeds from sale of property and equipment and assets held for sale    137,449       60,188
Principal receipts from notes, equipment contracts and other long-term receivables      10,276         9,922
Other           964          (558 )
Cash flows provided by investing activities   135,212      48,723
Cash flows from financing activities:
Borrowings under revolving credit facilities      50,000       25,000
Repayments under revolving credit facilities    (50,000 )     (25,000 )
Repayment of long-term debt (including premiums)  (184,237 )   (153,437 )
Principal payments on capital lease and financing obligations      (8,246 )     (10,296 )
Payment of debt modification and issuance costs       —     (12,307 )
Purchase of DineEquity common stock       —     (21,170 )
Repurchase of restricted stock      (1,690 )       (4,802 )
Proceeds from stock options exercised        5,443         6,326
Excess tax benefit from share-based compensation        4,757         5,713
Change in restricted cash      (8,158 )       (1,590 )
Other       —          (600 )
Cash flows used in financing activities (192,131 )  (192,163 )
Net change in cash and cash equivalents     11,147    (48,369 )
Cash and cash equivalents at beginning of period      60,691     102,309
Cash and cash equivalents at end of period $  71,838 $  53,940

NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)

Reconciliation of (i) net income available to common stockholders to (ii) net income available to common stockholders excluding impairment and closure charges; loss on extinguishment of debt; amortization of intangible assets; non-cash interest expense; debt modification costs; a one-time litigation settlement; general and administrative (“G&A”) restructuring costs, net of savings; gain/loss on disposition of assets; and the state income tax impact of deferred taxes due to refranchising, all items net of taxes (as appropriate), and related per share data:

  Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Net income available to common stockholders, as reported $ 58,698 $ 15,519 $ 104,345 $ 43,445
Impairment and closure charges        420         189        1,264    26,729
Loss on extinguishment of debt      2,306      —        4,917      7,885
Amortization of intangible assets      3,072      3,075        9,222      9,225
Noncash interest expense      1,502      1,594        4,547      4,582
Debt modification costs       —         (21 )      —      4,103
Litigation settlement      9,047      —        9,047      —
G&A restructuring costs, net of savings      1,269      —        1,269      —
(Gain)/loss on disposition of assets  (73,650 )      1,176    (89,642 )  (21,287 )
Income tax provision (benefit)    21,652    (2,393 )      22,943  (12,432 )
State income tax impact on deferred taxes due to refranchising    (6,258 )      —      (6,258 )      —
Net income allocated to unvested participating restricted stock         806         (82 )           990       (511 )
Net income available to common stockholders, as adjusted $ 18,864 $ 19,057 $   62,644 $ 61,739
Diluted net income available to common stockholders per share:
Net income available to common stockholders, as reported $     3.14 $     0.85 $       5.66 $     2.38
Impairment and closure charges        0.01        0.01          0.04        0.85
Loss on extinguishment of debt        0.07      —          0.16        0.25
Amortization of intangible assets        0.10        0.10          0.30        0.29
Noncash interest expense        0.05        0.05          0.15        0.14
Repricing expenses       —        0.00       —        0.13
Litigation settlement        0.29      —          0.30      —
G&A restructuring costs, net of savings        0.04      —          0.04      —
(Gain)/loss on disposition of assets      (2.39 )        0.04        (2.93 )      (0.68 )
State income tax impact on deferred taxes due to refranchising      (0.33 )      —        (0.33 )      —
Net income allocated to unvested participating restricted stock        0.04        0.00          0.05      (0.03 )
Change due increase in net income        0.01      (0.01 )          0.00        0.04
Diluted net income available to common stockholders per share, as adjusted $     1.03 $     1.04 $       3.44 $     3.37
Numerator for basic EPS-income available to common stockholders, as adjusted $ 18,864 $ 19,057 $   62,644 $ 61,739
Effect of unvested participating restricted stock using the two-class method           18           21             73          87
Effect of dilutive securities:
Convertible Series B preferred stock         688         647        2,033      1,915
Numerator for diluted EPS-income available to common stockholders after assumed conversions, as adjusted $ 19,570 $ 19,725 $   64,750 $ 63,741
Denominator for basic EPS-weighted-average shares    18,006    17,968      17,859    17,912
Effect of dilutive securities:
Stock options         246         275           270         356
Convertible Series B preferred stock         672         634           672         634
Denominator for diluted EPS-weighted-average shares and assumed conversions    18,924    18,877      18,801    18,902

DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In thousands)
(Unaudited)

Reconciliation of U.S. GAAP income before income taxes to EBITDA:

Nine Months
Ended
Twelve
Months Ended
September 30, 2012
U.S. GAAP income before income taxes $  163,070 $  199,829
Interest charges     101,974     137,849
Loss on extinguishment of debt         4,917         8,191
Depreciation and amortization       30,756       42,377
Non-cash stock-based compensation         8,799       11,379
Impairment and closure charges         1,264         4,182
Other         5,158         5,394
Gain on sale of assets     (89,642 )   (111,609 )
EBITDA $ 226,296 $ 297,592

Reconciliation of the Company’s cash provided by operating activities to free cash flow:

Nine Months Ended
September 30,
2012 2011
Cash flows provided by operating activities $ 68,066 $ 95,071
Principal receipts from notes, equipment contracts and other long-term receivables    10,276      9,922
Additions to property and equipment  (13,477 )  (20,829 )
Free cash flow $ 64,865 $ 84,164
DineEquity, Inc. and Subsidiaries
Non-GAAP Financial Measures
(In millions)
(Unaudited)
Reconciliation of U.S. GAAP gross segment profit to segment EBITDA:
Three Months Ended September 30, 2012
Franchise –
Applebee’s
Franchise –
IHOP
Company
Restaurants
Rental
Operations
Financing
Operations
Total
Revenue $ 43,771 $ 58,903 $  79,572 $ 30,920 $ 3,152 $ 216,318
Expense      1,129    26,019     68,541    24,237         15    119,941
Gross segment profit    42,642    32,884     11,031      6,683    3,137      96,377
Plus:
Depreciation/amortization      2,478      —      1,645      3,362      —        7,485
Interest charges      —      —           93      4,189      —        4,282
Segment EBITDA $ 45,120 $ 32,884 $ 12,769 $ 14,234 $ 3,137 $ 108,144
Three Months Ended September 30, 2011
Franchise –
Applebee’s
Franchise –
IHOP
Company
Restaurants
Rental
Operations
Financing
Operations
Total
Revenue $ 40,128 $ 57,551 $ 131,618 $ 31,163 $ 4,021 $ 264,481
Expense         603    24,403    113,976    24,521       425    163,928
Gross segment profit    39,525    33,148      17,642      6,642    3,596    100,553
Plus:
Depreciation/amortization      2,324      —        3,983      3,491      —        9,798
Interest charges       —      —           118      4,432      —        4,550
Segment EBITDA $ 41,849 $ 33,148 $   21,743 $ 14,565 $ 3,596 $ 114,901
Nine Months Ended September 30, 2012
Franchise –
Applebee’s
Franchise –
IHOP
Company
Restaurants
Rental
Operations
Financing
Operations
Total
Revenue $ 137,540 $ 176,002 $ 274,259 $ 92,096 $ 11,394 $ 691,291
Expense        3,075      78,051    232,298    73,075      1,586    388,085
Gross segment profit    134,465      97,951      41,961    19,021      9,808    303,206
Plus:
Depreciation/amortization       7,416       —        6,354    10,271      —      24,041
Interest charges       —       —           285    12,835      —      13,120
Segment EBITDA $ 141,881 $   97,951 $   48,600 $ 42,127 $   9,808 $ 340,367
Nine Months Ended September 30, 2011
Franchise –
Applebee’s
Franchise –
IHOP
Company
Restaurants
Rental
Operations
Financing
Operations
Total
Revenue $ 128,289 $ 172,493 $ 420,955 $ 95,003 $ 16,279 $ 833,019
Expense        2,199      76,457    363,021    73,734      6,001    521,412
Gross segment profit    126,090      96,036      57,934    21,269    10,278    311,607
Plus:
Depreciation/amortization        7,401       —      13,471    10,547      —      31,419
Interest charges      —       —           395    13,598      —      13,993
Segment EBITDA $ 133,491 $   96,036 $   71,800 $ 45,414 $ 10,278 $ 357,019

Restaurant Data

The following table sets forth, for the three and nine months ended September 30, 2012 and 2011, the number of effective restaurants in the Applebee’s and IHOP systems and information regarding the percentage change in sales at those restaurants compared to the same periods in the prior year. “Effective restaurants” are the number of restaurants in a given period, adjusted to account for restaurants open for only a portion of the period. Information is presented for all effective restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by the Company, as well as those owned by franchisees and area licensees. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. However, we believe that presentation of this information is useful in analyzing our revenues because franchisees and area licensees pay us royalties and advertising fees that are generally based on a percentage of their sales, as well as rental payments under leases that are usually based on a percentage of their sales. Management also uses this information to make decisions about future plans for the development of additional restaurants as well as evaluation of current operations.

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
Applebee’s Restaurant Data (unaudited)
Effective restaurants(a)
Franchise  1,871  1,766  1,861  1,757
Company     144     243     156     253
Total  2,015  2,009  2,017  2,010
System-wide(b)
Sales percentage change(c)      2.4 %    (0.1 )%      1.7 %      2.6 %
Domestic same-restaurant sales percentage change(d)      2.0 %    (0.3 )%      1.3 %      2.3 %
Franchise(b)(f)
Sales percentage change(c)      8.4 %    (1.3 )%      7.0 %      1.8 %
Domestic same-restaurant sales percentage change(d)      2.2 %    (0.4 )%      1.2 %      2.5 %
Average weekly domestic unit sales (in thousands) $ 45.1 $ 44.2 $ 47.4 $ 47.0
Company (f)
Sales percentage change(c)  (42.2 )%      1.4 %  (36.7 )%      1.0 %
Same-restaurant sales percentage change(d)      0.5 %      0.1 %      2.7 %      0.5 %
Average weekly domestic unit sales (in thousands) $ 39.3 $ 40.2 $ 42.5 $ 41.3
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(unaudited)
IHOP Restaurant Data
Effective restaurants(a)
Franchise  1,377  1,347  1,375  1,339
Area license     165     163     165     163
Company       17       10       15       10
Total  1,559  1,520  1,555  1,512
System-wide(b)
Sales percentage change(c)      0.9 %      2.6 %     1.9 %      1.7 %
Domestic same-restaurant sales percentage change(d)    (2.0 )%    (1.5 )%    (1.3 )%    (2.4 )%
Franchise(b)
Sales percentage change(c)      0.4 %      2.5 %      1.6 %      1.6 %
Domestic same-restaurant sales percentage change(d)    (2.0 )%    (1.5 )%    (1.2 )%    (2.4 )%
Average weekly domestic unit sales (in thousands) $ 33.8 $ 34.4 $ 34.2 $ 34.6
Company (e)   n/m    n/m    n/m   n/m
Area License(b)
Sales percentage change(c)     4.0 %     4.4 %     3.5 %      2.5 %
(a) “Effective restaurants” are the number of restaurants in a given fiscal period adjusted to account for restaurants open for only a portion of the period. Information is presented for all effective restaurants in the Applebee’s and IHOP systems, which includes restaurants owned by the Company as well as those owned by franchisees and area licensees.
(b) “System-wide” sales are retail sales at Applebee’s restaurants operated by franchisees and IHOP restaurants operated by franchisees and area licensees, as reported to the Company, in addition to retail sales at company-operated restaurants. Sales at restaurants that are owned by franchisees and area licensees are not attributable to the Company. Applebee’s domestic franchise restaurant sales, IHOP franchise restaurant sales and IHOP area license restaurant sales for the three and nine months ended September 30, 2012 and 2011 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(In millions)
Reported sales (unaudited)
Applebee’s franchise restaurant sales $ 1,011.4 $ 932.6 $ 3,165.4 $ 2,957.2
IHOP franchise restaurant sales $    604.8 $ 602.7 $ 1,834.6 $ 1,805.5
IHOP area license restaurant sales $      57.3 $   55.1 $    178.1 $    172.0
(c) “Sales percentage change” reflects, for each category of restaurants, the percentage change in sales in any given fiscal period compared to the prior fiscal period for all restaurants in that category.
(d) “Domestic same-restaurant sales percentage change” reflects the percentage change in sales, in any given fiscal period, compared to the same weeks in the prior year for domestic restaurants that have been operated throughout both fiscal periods that are being compared and have been open for at least 18 months. Because of new unit openings and restaurant closures, the domestic restaurants open throughout both fiscal periods being compared may be different from period to period. Same-restaurant sales percentage change does not include data on IHOP area license restaurants located in Florida.
(e) Sales percentage changes and domestic same-restaurant sales percentage change for IHOP company-operated restaurants are not meaningful (“n/m”) because there are few such restaurants, consisting of a relatively small number of restaurants in a single test market, along with a variable, small number of restaurants that are reacquired from franchisees from time-to-time and temporarily operated by the Company.
(f) The sales percentage change for the three and nine months ended September 30, 2012 and 2011 for Applebee’s franchise and company-operated restaurants was impacted by the refranchising of 115 company-operated restaurants in 2012 and 132 company-operated restaurants during 2011.
DineEquity, Inc. and Subsidiaries
Restaurant Data
The following table summarizes our restaurant development activity:
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(unaudited)
Applebee’s Restaurant Development Activity
Beginning of period 2,018 2,012 2,019 2,010
New openings:
Franchise        5        4      14      12
Total new openings        5        4      14      12
Closings:
Franchise      (7 )      (6 )    (17 )    (12 )
Total closings      (7 )      (6 )    (17 )    (12 )
End of period 2,016 2,010 2,016 2,010
Summary – end of period:
Franchise 1,954 1,767 1,954 1,767
Company      62    243      62    243
Total 2,016 2,010 2,016 2,010
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
(unaudited)
IHOP Restaurant Development Activity
Beginning of period 1,557 1,522 1,550 1,504
New openings:
Franchise      12     13      27      36
Area license     —       1       1        3
Total new openings      12     14     28      39
Closings:
Franchise      (4 )      (4 )    (11 )      (7 )
Area license     —     —      (2 )      (4 )
Total closings      (4 )      (4 )    (13 )    (11 )
End of period 1,565 1,532 1,565 1,532
Summary-end of period:
Franchise 1,383 1,356 1,383 1,356
Area license    165    163    165    163
Company      17      13      17      13
Total 1,565 1,532 1,565 1,532

Source: DineEquity, Inc.

Contacts:

Investor 
DineEquity, Inc.
Ken Diptee
Executive Director, Investor Relations
818-637-3632

Media 
Sard Verbinnen & Co.
Lucy Neugart and Samantha Verdile
415-618-8750

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